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Nissan taking drastic steps due to strong yen
January 10, 2011 / 1:53 AM / in 7 years

Nissan taking drastic steps due to strong yen

DETROIT (Reuters) - Nissan Motor Co (7201.T) will take drastic steps to shield itself against the profit-eroding effects of the strong yen, including shifting production of the next Rogue crossover to Tennessee from Japan, a top executive said.

Carlos Tavares, head of Nissan’s operations in the Americas and executive vice president at Japan’s second-biggest automaker, said the transfer, expected by 2013, would add more than 100,000 units a year of production in the Americas.

“As a global manufacturer, Nissan must have balance across our operations, not just in Japan,” Tavares said in remarks prepared for delivery at an industry conference on Sunday ahead of the Detroit auto show.

The strong yen is a serious challenge for all Japanese manufacturers, but it is one that Nissan has been most aggressive in tackling for many months.”

The decision to shift production of the Rogue, Nissan’s best-selling SUV, was first reported by Reuters last month.

While good for its bottom line, more production in the Americas would mean less in Japan -- a politically sensitive move that could jeopardize Japanese jobs at Nissan as well as its domestic suppliers. The Rogue is built at Nissan’s 430,000 units-a-year Kyushu factory in southern Japan.

Nissan Chief Operating Officer Toshiyuki Shiga, also in his capacity as chairman of Japan’s auto lobby, has repeatedly expressed his desire to keep Japan’s manufacturing sector healthy, while warning that a dollar below 90 yen was untenable for Japanese automakers’ domestic operations.

The dollar is currently fetching around 83 yen.

Nissan in 2010 built 1.1 million vehicles at its six factories in the Americas, selling 69 percent of those in the region. Tavares said Nissan plans to raise that rate of local production further, to 85 percent by 2015 -- a move that he said would reduce the currency exposure of Nissan’s vehicles by 50 percent.

Nissan will also halve the amount of auto parts imported from Japan to North America by early 2014, he said.

BULLISH ON 2011

After boosting its U.S. market share by 0.4 percentage point to 7.8 percent with an 18 percent sales rise in 2010, Nissan expects continued strong growth in 2011 with the launch of new products such as the remodeled Quest this month and the NV commercial van in February, Tavares said.

The NV launch would mark Nissan’s entry into the lucrative light commercial vehicle (LCV) market in the United States dominated by General Motors Co (GM.N) and Ford Motor Co (F.N).

“We expect (the NV van) will gain a fair portion of the 95-plus percent share that GM and Ford hold today, each with products whose designs are 20 years old,” Tavares said.

He expects the U.S. light vehicle market to total 13 million units this year, up 12 percent from 2010.

While achieving market share growth in the United States, Nissan’s spending on incentives was also higher, exceeding the industry average for the first time in at least a decade, according to Autodata.

Nissan spent an average $2,980 per vehicle in incentives in 2010, the most among Asian brands, underscoring its weaker brand power against rivals such as Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T).

In a bid to improve its brand standing, Tavares said Nissan would step up its marketing and public relations efforts in the coming year, including by returning to the Detroit auto show as an exhibitor in 2012 after a three-year hiatus.

Elsewhere, Nissan will launch the Mexico-built March/Micra subcompact this year in Latin America, including Brazil, hoping to build on its 21 percent sales jump in the Americas last year, Tavares said.

“When this model launches in Brazil later this year it will take us from competing in only 22 percent of the Brazilian market to more than 65 percent -- a critical factor in supporting our goal to raise our market share in the country from 1.0 percent today to 5.0 percent by 2015,” he said.

Reporting by Chang-Ran Kim; Editing by Tim Dobbyn

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